Getting ‘A’ Returns on ‘B’ Properties

It’s not unusual in Dallas for one day of commercial real estate news to tout a corporate relocation with 1,000 new jobs, a multimillion dollar office building renovation, and signing of a 50,000-square-foot lease at top-of-market rates. Looking through such a positive Dallas CRE lens, it’s hard to figure out national headlines warning of the risk of office building defaults and other deteriorating conditions that can stress real estate.

Earlier this month, The Wall Street Journal reported on “… a growing view that the best days are in the past for this property cycle.” Do you agree with this? My view is that it’s quite possible that some U.S. markets are near their likely peaks and some CRE sectors are fully valued, if not frothy. But to me, such conditions only mean that the easy and obvious deals are probably gone. From the perspective of a value-add investor for 25 years, I think there are still opportunities out there to be found.

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